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Hollande holiday home tax labelled a 'political stunt'

As part of its plan to raise €7.2 billion in tax revenues to boost its ailing economy, the French government has put foreign owners of holiday homes in its line of fire. But many think the planned tax hikes are just a ‘political stunt’.

France’s new socialist government set heart rates rocketing this week among the thousands of foreigners who spend their holidays in the country.

President Francois Hollande wants to introduce a controversial tax hike aimed at non-residents who own second homes in France. The measure is part of his drive to target the country’s most wealthy and raise €7.2 billion in tax revenues.

Flexing its muscles this week, the government announced it would impose an extra social charge of 15.5% on the capital gains tax relating to the sale second homes. The overall levy on the profit from the sales would therefore rise from 19.5% percent to 34.5%. Under the proposals the same 15.5 % social charge would also be applied to rental income from holiday homes, raising the rate that owners would have to pay from 20% to 35.5%.

The extra charges would mean holiday home owners pay the same rates expatriates whose primary residence is in France and French nationals. The contentious plan has sent ripples across the English Channel to the UK, where thousands own second homes in France. The proposals could become law by the end of the month.

FRANCE 24 asks those in the know, and those who will be most directly affected, to shed light on the proposal.

The view from the government:

France’s finance ministry said the tax hikes would add €50 million to the country’s coffers this year and €250 million next year.

Germinal Peiro, Socialist Party MP for the Dordogne region of France: “We don’t want to scare the foreign home owners away from the Dordogne. They are part of our community and contribute a great deal to the local economy. But if they make a profit from the renting of their home then they should pay the same level of tax as the French.”

The view from the property market

Patrick Joseph, editor of My-French-house.com: “It’s a little short-sighted. France is one of the top tourist destinations in the world, so in the current climate you would expect the government to be encouraging people to come rather than saying we are closed for business.

“I don’t think it will have an impact on many people. People don’t buy property in France just to sell it on. Plus if they don’t make any profit on the house, they won’t pay the capital gains tax. And from what we understand, most people who rent out their properties do it off the books to people they already know so they don’t pay tax on rental income anyway."

David Yeates, editor of French-property.com: “We have been inundated by worried second-home owners wondering how this is going to affect them. I am saying to people not to panic. I think they are just making a political statement rather than proposing a realistic fiscal charge. Sarkozy tried something similar and it was dropped because it proved to be against EU law. I think Hollande will do the same once letters start landing on his desk from London and Brussels.”

Kate Carnduff, Herman de Graaf estate agent, Dordogne : “I think its all hot air on the part of Francois Hollande. In France they tend to suggest a lot of laws that never end up being brought in. Apart from that, I don’t think it will turn off many people from buying a home here because those that do, do so because of a lifestyle choice. They don’t do it for financial reasons.

The view from the tax expert

French born solicitor and tax specialist Patrick Delas, of the London firm Russell-Cooke: “I see a big problem here because they want to apply the social charges to non-residents, which is basically against the constitution and against EU law. You can’t apply social charges to those don’t benefit from the social services like hospitals.”

The view from a second home owner

Paul Lamarra,a journalist with France Magazine who owns a second home in Brittany: “If I was thinking of renting out my home, then this tax rise would definitely dissuade me from doing so. It seems a bit bizarre to introduce a social charge when we don’t get the benefit. It’s not in the spirit of Europe, but I don’t hear of people wanting to disappear from France yet.”

John Smith from London, who owns a property in the Lot region told Le Figaro: “If we have to pay, then I’ll pay. A change in tax policy will not make me give up my home and my project to retire in France. It would take a lot more than that to make me change my mind. I’d rather pay more and keep my house.

The view from the expat blogs

A member of Survive France Network: “If you can't afford the taxes on a second home, the answer is simple, don't buy one. I can't honestly see the point of a "holiday home.” Surely, if you like going to a certain country then to go there as a tourist / holiday maker is a far cheaper option, and when you decide to retire / whatever and go and live in the country of your choice, then is the time to buy the house of your choice.”